With consumers reigning in spending in South Africa, retailer Massmart cuts its earnings per share forecast for the first half of the year and named Mitchell Slape, a Walmart executive, as its new CEO.
Reuters, citing a statement from Massmart, reported the retailer said on Thursday (May 23) that earnings per share for the first half of the year, which closes at the end of June, will be 50 percent or more lower than the same period a year ago. Operating profit could be flat, noted the report.
“Current economic data and sentiment cause us to believe, however, that most risks associated with the above estimates are likely to the downside,” Massmart said in a statement. Massmart said that during the first 20 weeks of the current year, sales increased 6.1 percent to 33.5 billion rand.
Massmart and other retailers in South Africa have been having a difficult time increasing earnings as consumers rein in spending. An increase in the value-added tax, rising unemployment and higher costs for fuel and utilities have prompted consumers to spend less in South Africa.
Investors reacted negatively to the news, sending shares of Massmart to a 10-year low in trading Thursday. The company is majority owned by Walmart. Earlier this month Chief Executive Guy Hayward resigned from the company. Newly-appointed CEO Slape has been with Walmart since 1995, holding various leadership roles in the U.S., Japan, India and Mexico. The new chief executive will be overseeing a massive expansion of Massmart, which plans to open an additional 47 stores between now and 2021.
The company has operations in 13 sub-Saharan Africa countries. The news outlet noted that around one-third of the new stores will be outside of South Africa, where it has been slowly expanding. Slape’s job as CEO will kick off on the first day of the month after he is granted an intra-company transfer permit and visa to work in South Africa.